The murky relationship between the bitcoin price and “tether” tokens is raising suspicions

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As the bitcoin price has surged, so has the supply of a digital token called tether. Tethers are tokens backed by US dollar deposits, with each tether always worth one dollar. This allows cryptocurrency traders to cash in and out of bitcoin quickly, using tethers to transfer proceeds to other exchanges or digital wallets while avoiding the lengthy process of converting the sums in and out of fiat currency.

But the usefulness and legitimacy of tether rests on the claim by its issuer, a British Virgin Islands-based entity of the same name, that the tokens are indeed backed by dollar deposits. If the tokens aren’t fully backed by deposits, it means the bitcoin price could have been bid up by tokens that aren’t worth what they say they are. Questions about the company’s purported cash deposits are growing louder, as the bitcoin price surpassed $16,000 in intraday trading today. (It began the year at around $1,000.) The value of tethers in circulation is now more than $800 million.

The latest warning about tethers comes from Sarit Markovich, a professor at Northwestern University’s Kellogg School of Management. Speaking to Quartz, she expressed concern about the sheer amount of tethers being created, or “printed.” Following a $150 million increase, or over 20% in new supply, last month, it’s important for the company to verify that it has enough cash in reserve to back all those tokens, she said. Auditing should be done by a top-tier firm to allay questions.

Tether has long had a murky relationship with Bitfinex, the world’s biggest bitcoin exchange by trading volume. Documents leaked as part of the Paradise Papers cleared things up: The two entities share the same operators, Phil Potter and Giancarlo Devasini, the New York Times reported. Potter is chief strategy officer at Bitfinex and a director at Tether. Devasini is a director of both companies, according to Bloomberg.

Neither Tether nor Bitfinex had confirmed their relationship. Their relationship provides a key channel for tethers to enter cryptocurrency markets. When tethers flow to the Bitfinex exchange, the price of bitcoin often appears to increase, Markovich said. While correlation doesn’t imply causation, Markovich thinks the increase in tether supply and bitcoin prices deserves greater scrutiny. Markovich also detailed her concerns in a story for Fortune.

Put another way, if an affiliate of the New York Stock Exchange was able to print money at will to buy stocks on the exchange, questions would be asked and assurances sought about the legitimacy of a rally, especially if prices rose as rapidly as bitcoin in recent weeks. The financial information released by Tether to date, described as “part of ongoing efforts to further professionalize the transparency mechanisms” of the firm, consists of a September report—not an official audit—conducted by a mid-sized accounting firm based on bank statements and screenshots of digital wallet contents provided by Tether. The names of banks holding the company’s funds were redacted.

Trying to suss a relationship between tethers and bitcoin—like trying to identify a relationship between bitcoin and anything else—is tricky. The tether supply has increased by over 8,000% so far this year, while bitcoin’s price has risen by a mere 1,500% (or so) over the same time.

Tight-lipped Bitfinex and Tether recently engaged a New York-based public relations firm called 5W Public Relations to field media inquiries. Ronn Torossian, 5W’s chief executive and president, offered to show Quartz evidence of Tether’s funds, on the condition that we sign a non-disclosure agreement agreeing not to name the banks where the funds are held. Quartz declined the offer.

Torossian said Tether is in the process of a “full audit” and that the non-disclosure agreement is needed because banks are “hard to come by” in the cryptocurrency industry. Indeed, it lost access to accounts with four Taiwanese banks, and their correspondent banking relationship with Wells Fargo, in April. “We appreciate every single one of our customers who have made Bitfinex the largest and best cryptocurrency exchange in the world,” Torossian said in an emailed statement.

In addition to their banking woes, both Bitfinex and Tether have suffered costly hacks. Last August, Bitfinex lost nearly 120,000 bitcoins, worth about $60 million at the time, to a hack. It made customers take a 36% haircut on funds held with the exchange as a result. Tether reported a $30 million hack last month. Another major exchange, Bittrex, based in Washington, has caused alarm because some of its customers have been unable to withdraw their funds, Business Insider reported this week. Bittrex has said the delays are due to stepped up security checks to comply with US money-laundering laws.

A sky-high bitcoin price and rumors of trouble at major exchanges will be familiar to longtime participants in cryptocurrency markets. In November 2013, bitcoin hit a then-historic high of nearly $1,200 after starting the year at around $20, a gain of 5,900%, or a return several times larger than this year’s spectacular run-up. But bitcoin forums and message boards were abuzz with complaints about slow withdrawals from the Tokyo-based Mt. Gox exchange, then the dominant trading platform.

In February 2014, trade publication CoinDesk conducted a survey to determine the extent of the problem. The results were alarming: Nearly 70% of Mt. Gox customers who responded said they were waiting for requested withdrawals, in some cases for months. By the end of that month, Mt. Gox was taken offline and had filed for bankruptcy, with hundreds of thousands of bitcoins—now worth billions of dollars—missing. A year later, bitcoin changed hands for as little as $170, a decline of nearly 86% from its previous peak.

Three years after the collapse of Mt. Gox, the recent rally has brought bitcoin back to its previous boom-time levels, and beyond. But traders are once again worrying about whether exchanges are up to the task.